Revisiting and Revamping the PDS

Economy Mar 17, 2021

Public Distribution System (PDS) has emerged as an important tool of the Government to manage the food economy in India. People could avail these subsidized goods by using a ration card in the public distribution shops or fair price shops (FPS) who would primarily sell commodities such as rice, sugar, wheat and kerosene at Issue Price i.e. a price lower than the market price. These FPSs have been set up throughout the country, over 5.5 lakh shops, that are managed collectively by the Centre and the states.

Challenges in the PDS

Over the past few decades, the withdrawal of food grains by the states under numerous schemes from the central collection has only seen an upward surge. Between 2016-17 and 2019-20, the loans taken, for the purpose of food subsidy, by the Food Corporation of India (FCI) under funds such as National Small Savings Fund (NSSF) amounted to around Rs.1.65 lakh crore and Rs.2.2 lakh crore. It is estimated that in the coming times the annual subsidy bill of the Union will be around ₹2.5 lakh crore.

According to the 2016 report of the Comptroller and Auditor General, 49% of the beneficiaries had not been identified and there is also a dearth of storage facilities in the states to store the supplies allocated by the centre.

The Government has been borrowing from the NSSF to pay the food subsidy bill by issuing special Government Securities. But this practice was eliminated from the new financial year according to the Union Budget 2021-22.

Poor quality of food grains has been a recurring problem with the PDS. The Minimum Support Price (MSP) is higher than the market price and the variety of commodities procured by the Government is limited to crops like sugarcane, rice and wheat. This reduces the incentive for the farmers to cultivate other crops such as pulses.

Revamping the PDS

It was in this context that the Economic Survey 2020-21 pointed out the issue of a growing food subsidy bill in the Parliament in January 2021. The government also said that the issue “is becoming unmanageably large.”

Hence, there is no other way than to revisit the PDS system and bring about certain critical changes. Ration cardholders could be given an option to “give-up” (as was done in the case of cooking gas cylinders a few years ago). Except those in dire need, beneficiaries may be asked for a slightly higher price for the commodities. The Centre could take proactive steps towards nudging the states into identifying the Priority Households (PHH) with due scrutiny. With regards to the prices, the slab system can be instituted instead of flat rates. The prices may be determined by due consultations with the concerned authorities and stakeholders at Union and state levels.

There is no doubt that the PDS is helpful to a vast majority of the population. However, unless the PDS undergoes some structural changes it may not achieve its objectives, i.e. public welfare. Computers and the internet are the aides of the modern era and hence the operations must be computerized from end to end, the data of ration cards digitized and FPSs automated for pruning the subsidy bill and also avoiding any scope for leakages. And in this, there should be no inadequacy of political willingness.

This article has been written by Ruchira Sarma for The Paradigm

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